“Consumer sentiment is still pretty low by historical standards, but it’s improved pretty dramatically,” said Joan W. Shu, an economist at the University of Michigan and director of closely monitored consumer research. are beginning to be seen,” he said. “That’s largely due to a slowdown in inflation, especially with lower gasoline prices.”
This is especially good news for the White House, which has been criticized for its poor response to inflation.
Gasoline prices, which peaked at over $5 a gallon in June, have fallen to about $3.74 a gallon nationwide. This 25% cost savings was substantial for many Americans, especially those from low-income households whose gas bills make up a large percentage of his weekly spending.
Meanwhile, overall inflation eased slightly as a result of aggressive interest rate hikes by the Federal Reserve.
Still, the effect on both the notebook and the psyche was swift. Business conditions, short-term financial outlook and purchasing plan indicators all improved in August, according to the Conference Board’s key indicators. Consumer confidence rose in the month after his third straight month of decline, and the number of Americans reporting vacation plans reached an eight-month high.
“When gas prices drop sharply, people immediately feel better,” said Diane Swonk, chief economist at accounting giant KPMG. It makes a big difference in how much people spend and what they expect in the future.”
Nils Haaland of Omaha says he feels a lot better about the economy now that gasoline for his Honda pickup truck has gone from $95 to $65. Harland works in the community. He teaches theater at a college and sometimes works as a handyman. He said fuel and food prices soared this summer, forcing him and his wife to stop eating out, postpone summer travel, and cut back on meat purchases. But he said he fears inflation will continue to spiral out of control.
“For a long time, I was careful not to overfill my shopping basket indiscriminately at the grocery store, but now a lot of that behavior has eased a bit,” said the 58-year-old woman. She said, “When the gasoline set her back to $3.50 a gallon, all of a sudden, I was like, ‘Oh, I know how to make this work. Things are going to be okay.'”
The Federal Reserve is moving quickly to raise interest rates enough to keep inflation in check. While there are signs that the approach is working, prices have stabilized and house prices are starting to fall in some areas, central bank actions could slow the economy too much, leading to a recession. There are still concerns that there are
The looming question is whether the current lull marks a tipping point for inflation, or just a lull before the economy takes a turn for the worse.
KPMG’s Swonk said: “The Fed still has a big challenge and that is to get inflation under control beyond gas prices and before it fundamentally distorts people’s behavior.” “It’s very complicated now. The more complicated it is, the more likely it is to fail.”
In California, Jack Foot says economic uncertainty will force him to rethink his retirement plans. Hoet, 58, had hoped he would retire in June, but his recent pay rise, combined with lingering concerns that the economy was still deteriorating, has pushed him to a managerial position at the Los Angeles Unified School District. said he could have stayed a little longer.
“I feel better about gas prices and the economy in general, but I’m also worried that things could get worse,” Foote said. “It may be stable for now, but it feels uncertain.”
Inflation remains a top priority for US voters heading into the midterm elections, but the percentage of Americans who say it is their top concern is falling. According to a new NPR/PBS NewsHour/Marist poll, about 30% of Americans said rising prices were their biggest issue in voting, down from 37% in July.
After over a year of significant price increases, many households have become familiar with their spending habits.
According to the Fed’s latest “Beige Book” report, released this week, many households are switching to cheaper goods and spending more on food and other essentials.
That’s certainly the case at Walmart, where executives say they’re seeing more middle- and upper-income customers than usual. The retail giant, known for its low prices, also found that families were more likely to buy store brands and lower-priced options, such as hot dogs and canned tuna, instead of deli meats.
“As the year progressed, we began to see more pronounced consumer shifts and trade-down activity,” said John David Rainey, the company’s chief financial officer, on the company’s August earnings call.
Leslie Hicks, 67, a retired account manager in Gadsden, Alabama, says she and her husband have started traveling again now that gas prices are more manageable. I’m going to the Bahamas to go on a Mediterranean cruise this month.
“Gasoline prices were going up all year long, but until recently I realized how much I had cut back on my savings,” Hicks said, adding that instead of buying groceries, he started buying groceries at Walmart. . Delivery from a more expensive chain.
“We’re not going back to all of our old habits just yet, but we’re feeling completely better about the economy,” she said.
Some business owners are also noticing the change. Suzanne Windham, a dentist in Shreveport, Louisiana, says customers are starting to spend more freely. They are more willing to pay for expensive treatments than they were earlier this year, when COVID-19 risks and financial concerns rose.
But now, with business up 15% from last year, Windham says he feels better about the economy.
“I was surprised that business was booming, but it’s been really good,” she said. “People seem more relaxed and less worried.”